GAO-16-375SP: Health: 7. Medicaid and Exchange Coordination

Health > 7. Medicaid and Exchange Coordination

The Centers for Medicare & Medicaid Services should take actions to minimize the risk of duplicative federal spending on health insurance coverage for individuals transitioning between Medicaid and exchange coverage.

Why This Area Is Important

The Patient Protection and Affordable Care Act (PPACA) provided many low-income Americans with a new pathway for maintaining health insurance coverage.[1] Specifically, under PPACA, states may opt to expand eligibility for Medicaid—the joint federal-state program that finances health insurance coverage for certain categories of low-income individuals—to individuals who are not eligible for Medicare and whose incomes are at or below 133 percent of the federal poverty level.[2] As of March 2015, 29 states had chosen to expand their Medicaid programs.Additionally, PPACA required that health insurance exchanges—that is, marketplaces where eligible individuals may compare and select among private health plans—be established in all states. As of March 2015, 17 states had chosen to establish and operate their own exchanges, referred to as state-based exchanges. Thirty-four states allowed the Centers for Medicare & Medicaid Services (CMS)—the agency within the Department of Health and Human Services (HHS) responsible for overseeing Medicaid and the exchanges—to do so; such exchanges are known as federally facilitated exchanges (FFE).

PPACA also provided for federal subsidies to assist qualifying low-income individuals in affording exchange coverage, referred to as subsidized exchange coverage. For example, individuals may be eligible for premium tax credits if their incomes fall between 100 and 400 percent of the federal poverty level, and they do not have access to Medicaid or other minimum essential coverage.[3] Eligible individuals may choose to have advance payments of the premium tax credit (APTC) made on their behalf to issuers of health coverage to reduce their premium costs for exchange plans. The amount of APTC for which an individual is eligible is based on an estimate of the premium tax credit the individual will claim on his or her tax return. Individuals receiving APTC must file a federal income tax return with the Internal Revenue Service (IRS) to reconcile the amount of the tax credit allowed with the amount received in advance and may be liable to pay back any excess credits received.

Changes in income and other factors can change an individual’s eligibility for Medicaid and for subsidized exchange coverage, and as many low-income individuals experience income volatility, transitions between the two coverage types are likely under the law. Previous research has estimated that out of all individuals who receive either Medicaid or exchange subsidies, 6.9 million (7 percent) will experience a change in eligibility from one to the other each year.[4] In October 2015, GAO reported that a relatively small percentage of Medicaid and exchange coverage enrollees transitioned between the coverage types in three selected states in 2014, but that such transitions may increase in the future.

PPACA required the establishment of a coordinated eligibility and enrollment process for Medicaid and exchange coverage. This process helps ensure that individuals are enrolled in the coverage for which they are eligible and transferred to the appropriate form of coverage if their eligibility changes. Since the enactment of the law, CMS has issued regulations and technical guidance outlining aspects of this process, which can involve significant coordination between state and federal information technology (IT) systems. Given the complexity of designing coordinated policies and systems, challenges could arise during the transition process. For example, individuals may become simultaneously enrolled in both Medicaid and subsidized exchange coverage (referred to as duplicate coverage), which is only allowed in limited circumstances under federal law.[5]



[1] Pub. L. No. 111-148, 124 Stat. 119 (2010), as amended by the Health Care and Education Reconciliation Act of 2010 (HCERA), Pub. L. No. 111-152, 124 Stat. 1029 (2010). For the purposes of this report section, references to PPACA include the amendments made by HCERA.

[2] PPACA also provides for a 5 percent disregard when calculating income for determining Medicaid eligibility, which effectively increases this income level to 138 percent of the federal poverty level. For the purposes of this report section, the District of Columbia is considered a state. 

[3] References to Medicaid coverage in this report section do not include Medicaid plans that provide less than full benefits, such as Medicaid plans that cover only family planning.

[4] See M. Buettgens, A. Nichols, and S. Dorn, Churning Under the ACA and State Policy Options for Mitigation (Washington, D.C.: Urban Institute and Robert Wood Johnson Foundation, June 2012). This study also notes that some of these individuals may choose not to enroll in the coverage for which they become eligible and instead become uninsured.

[5] Individuals enrolled in subsidized exchange coverage who are found to be eligible for Medicaid are permitted to be enrolled in both types of coverage through the end of the month of the eligibility determination. See 26 U.S.C. § 36B(c)(2)(A)-(B); 26 C.F.R. § 1.36B-2(c)(iv).

What GAO Found

In October 2015, GAO reported that CMS’s policies and procedures do not sufficiently minimize the potential for duplicate coverage in states with FFEs, which increases the risk that the federal government could be paying twice—subsidizing exchange coverage and reimbursing states for Medicaid spending—for the same individuals.[1] GAO found that a limited amount of duplicate coverage may be expected, and is permitted under federal law, for individuals completing the transition from subsidized exchange to Medicaid coverage. However, GAO found that duplicate coverage was also occurring outside of this transitional period in cases where individuals did not end their subsidized exchange coverage after being determined eligible for Medicaid, or where they enrolled in subsidized exchange coverage when already enrolled in Medicaid. For example, one state reported that 3,500 individuals had duplicate coverage at some point from January to July 2014. However, the full extent to which duplicate coverage was occurring was unknown.

While CMS has taken some steps to minimize the potential for duplicate coverage in states with FFEs, GAO found that its current policies and procedures were not sufficient based on federal standards for internal control.[2]

  • GAO found vulnerabilities in CMS’s methods for preventing individuals from maintaining subsidized exchange coverage after being determined eligible for Medicaid. For example, CMS does not have procedures to automatically terminate exchange subsidies when individuals are determined eligible for Medicaid—a practice that some states with state-based exchanges have in place.
     
  • GAO found vulnerabilities in CMS’s methods for preventing individuals enrolled in Medicaid from also enrolling in subsidized exchange coverage. While CMS generally performs an automated check of state IT systems to determine whether individuals already have Medicaid before initially determining them eligible for subsidized exchange coverage, CMS officials recognize that there are a number of limitations to this check. For example, officials said the checks identify at a point in time whether an individual is enrolled in Medicaid, and so would not indicate if a Medicaid determination was pending. In addition, CMS did not perform a check for Medicaid coverage for the 1.96 million individuals who were enrolled in exchange coverage in 2014 and were automatically reenrolled for 2015, thereby increasing the risk that duplicate coverage occurring during the year would continue in the next year.
     
  • GAO found that CMS did not have procedures in place as of July 2015 to detect and resolve duplicate coverage. CMS officials told GAO that the agency planned to implement periodic checks for duplicate coverage beginning in the summer of 2015. Officials also said that in 2016, if CMS can build the necessary functionality, the agency plans to begin automatically terminating exchange subsidies for those with duplicate coverage who do not do so themselves, as appropriate, upon agency notification. However, the effectiveness of these plans will depend in part on how frequently the checks are conducted. As of July 2015, CMS had not yet decided the frequency, with officials noting that it will depend in part on the agency’s analysis of the first check. In addition, while CMS officials told us they intend to monitor the results of the checks, they do not have a specific plan, including thresholds for the level of duplicate coverage that the agency deems acceptable, to routinely monitor the effectiveness of these and other procedures.

These weaknesses increase the risk of duplicative federal spending on health insurance coverage for individuals transitioning between Medicaid and subsidized exchange coverage in states with FFEs. In states where Medicaid agencies have identified that individuals are enrolled in exchange coverage—and Medicaid is operating as the payer of last resort, as required—there may not be a significant difference in federal costs for the individual during the period of duplicate coverage compared with what would have been spent if duplicate coverage had not occurred.[3] However, GAO previously reported that some states may face challenges identifying exchange coverage.[4] If a state is not aware of an individual’s exchange coverage, the federal government could be both subsidizing exchange coverage and reimbursing states for Medicaid spending for the same individual. The risk of duplicate payments may be higher in states where a large proportion of Medicaid enrollees use Medicaid managed care because the state pays issuers a monthly fee for each enrolled individual, regardless of whether services are received.[5] Further, while the tax reconciliation process for the APTC has the potential to reduce the financial implications of duplicate payments, IRS officials stated that the agency will generally not have the data necessary to identify duplicate coverage until 2016. They added that the agency’s ability to identify the need for repayment of the APTC because of duplicate coverage at that time will depend on the quality of the data and IRS’s available resources.



[1] Our review focused primarily on federal controls for the FFE. At the time of the review, these controls affected 34 FFE states and 3 additional states that rely on the FFE IT systems. The 4 states in our review with state-based exchanges had implemented integrated eligibility and enrollment systems for Medicaid and exchange coverage, which included IT system rules that help prevent duplicate coverage.

[2] See GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999).

[3] See generally 42 C.F.R. § 433.135 et seq. Where individuals are enrolled in Medicaid along with another form of coverage, the other source of coverage must pay to the extent of its liability before Medicaid pays. States are required to take certain steps to identify these other sources of coverage and ensure that they pay to the extent of their liability.

[4] See GAO, Medicaid: Additional Federal Action Needed to Further Improve Third-Party Liability Efforts, GAO-15-208 (Washington, D.C.: Jan. 28, 2015).

[5] The alternative to a managed care a model is a fee-for-service model, in which states pay health care providers for each service delivered. In fiscal year 2014, about 37 percent of national Medicaid spending was attributable to Medicaid managed care.

Actions Needed

To better minimize the risk of duplicate coverage for individuals transitioning between Medicaid and exchange coverage in FFE states, GAO recommended in October 2015 that the Administrator of CMS take the following two actions:

  • Establish a schedule for regular checks for duplicate coverage and ensure that the checks are carried out according to schedule.
     
  • Develop a plan, including thresholds for the level of duplicate coverage it deems acceptable, to routinely monitor the effectiveness of the checks and other planned procedures to minimize duplicate coverage, and take additional actions as appropriate.

Because GAO found that CMS did not have a process in place to identify individuals with duplicate coverage, the extent to which duplicate coverage was occurring and the extent to which duplicative payments were being made for such individuals could not be determined. Therefore, GAO cannot estimate the costs associated with this duplication. However, taking these actions should help minimize the occurrence of duplicate coverage, thus helping protect the federal government from unnecessary and duplicative expenditures.

How GAO Conducted Its Work

The information contained in this analysis is based on findings from the products listed in the related GAO products section. To examine the extent to which the federal government had policies and procedures that minimize the potential for duplicate coverage when individuals transition between Medicaid and exchange coverage, GAO reviewed relevant PPACA provisions, federal regulations, and guidance for Medicaid and the exchanges. GAO also reviewed FFE procedures and interviewed CMS officials to determine whether CMS’s policies and procedures for FFE states included internal controls consistent with federal standards. In addition, GAO collected information from and interviewed Medicaid officials from eight states selected, among other factors, to include four with FFEs; representatives of five issuers, selected because they offered both types of coverage in one or more selected states; and a trade association representing issuers that offered both types of coverage in multiple states throughout the country. GAO also interviewed IRS officials on the agency’s process for reconciling APTC, including how the agency might identify cases of duplicate coverage.

Table 5 in appendix V lists the programs GAO identified that might have similar or overlapping objectives, provide similar services, or be fragmented across government missions. Overlap and fragmentation might not necessarily lead to actual duplication, and some degree of overlap and duplication may be justified.

Agency Comments & GAO Contact

In commenting on the October 2015 report on which this analysis is based, HHS concurred with GAO’s recommendations and described steps it has taken and plans to take to minimize the risk of duplicate coverage. For example, HHS stated that its first check for duplicate coverage was under way in August 2015, and that HHS plans to analyze the rate of duplicate coverage identified and gather other relevant input in order to establish the frequency of checks going forward. HHS also stated that it plans to monitor the rate of duplicate coverage identified in periodic checks and that it is working to implement additional internal controls to reduce duplicate coverage, including automatically ending exchange subsidies for individuals also found to have been determined eligible for Medicaid.

GAO provided a draft of this report section to HHS for review and comment. The department did not provide comments on this report section.

For additional information about this area, contact Carolyn L. Yocom at (202) 512-7114 or yocomc@gao.gov or John E. Dicken at (202) 512-7114 or dickenj@gao.gov.